Author Topic: How am I doing so far?  (Read 2195 times)

grosvenor6

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How am I doing so far?
« on: July 13, 2016, 05:29:55 AM »
21 Years Old, engaged, planning on wedding in a couple years but very small, looking to spend close to nothing as we want a picnic type wedding. Still living at home.

Gross Salary/Wages: 41k per year.
Fiance (19) still in school, when she gets out she will start at 50k based on average entry level salaries.
Everything below applies just to me since she does not live with me yet, she has no retirement savings yet but has 20k saved in the bank.

Pre-tax deductions: 6% a week to 401k, company matches 100% up to 5%

Current monthly expenses:
$250 per month car payment, 16k left at 2%
$144 car insurance
$75 per month gas
$0 rent (live at home)
$200 Fun money (estimate of money used when going out with fiancÚ to dinner, activities etc.)

Assets:
$5600 in Target Date 401k
19k in Savings
Will be receiving house either from grandparents or fiancÚs mom mortgage free in the next 5 years.

I get raises every 4-8 months because of a Union contract, so every year I go up about 2-3 dollars a year, capping out at 73k.

If I was to keep these expenses for the next 5 years or so, and then add on the usual housing costs like utilities, taxes, etc, do you think I am in good shape to retire earlier than the usual age of 65?
         




CowboyAndIndian

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Re: How am I doing so far?
« Reply #1 on: July 13, 2016, 05:49:35 AM »
Yes, you are in good shape. At the age of 21, very few have any idea of saving, so you are doing good.

Just make sure that you do not let hedonistic adaptation occur! (http://www.mrmoneymustache.com/2011/10/22/what-is-hedonic-adaptation-and-how-can-it-turn-you-into-a-sukka/).

Some suggestions: Learn about investing so you can get the max out of your savings. Increase your 401k contribution to the max. Looks like your car is your major expense. Lots of articles on MMM on how to reduce your car costs.

You have some huge advantages (no loans, free house etc.). You should be able to retire by the time you are 40 , or even earlier if you turn out to be a badass.

Best of luck in your journey!

« Last Edit: July 13, 2016, 05:54:11 AM by CowboyAndIndian »

FrugalFan

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Re: How am I doing so far?
« Reply #2 on: July 13, 2016, 05:58:08 AM »
You are in a great situation with a good income and very low expenses. You could easily retire in less than 10 years if you keep your expenses low and avoid lifestyle inflation. The situation will get even better when your fiancee gets a job and you pool your incomes. You can use a quick calculator like this one to see how long it will take you to be financially independent based on different savings scenarios. Just remember that your expenses will go up when you have a house even if you are mortgage free (utilities, property tax, repairs and maintenance, furnishing the house), so you need to take that into account.

networthify.com/calculator/earlyretirement

But, you can only retire early if you put your money to work for you by investing. I would keep a small emergency fund in savings (since you don't have any large expenses) and invest the rest of the money you currently have in savings.

boarder42

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Re: How am I doing so far?
« Reply #3 on: July 13, 2016, 06:05:00 AM »
The 19k should be invested you are getting a house free and appear to have large safety nets. You should be putting 18k in your 401k and 5500 in an IRA. And something in an HSA if available.  Are your parents claiming you as a dependent still that may change some of these recommendations if you can't get the tax breaks

grosvenor6

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Re: How am I doing so far?
« Reply #4 on: July 13, 2016, 06:05:43 AM »
The only reason I was keeping the money in savings was incase something fell through with our plan on receiving one of the houses mortgage free and we would have to end up buying a place of our own, this way I would be able to have something for a down payment. Also we want to take a few trips before we have the idea of having kids, so having some extra money in savings could always help.  What would you suggest taking out of my savings and investing? Also should this money be put into a Roth IRA?

grosvenor6

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Re: How am I doing so far?
« Reply #5 on: July 13, 2016, 06:06:13 AM »
This past year I do not believe they claimed me as a dependent as I received 3500 back in taxes.

FrugalFan

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Re: How am I doing so far?
« Reply #6 on: July 13, 2016, 06:16:59 AM »
It sounds like you may already be falling into some lifestyle inflation. You should save for a house down payment once you are certain that you want to buy a house, especially since there seem to be 2 other viable options on the table. If they both fall through, then you can start saving for a down payment. If you decide to buy a house, keep saving for retirement but set aside x amount of money per month for a down payment. As for trips, you should set a budget of how much you think is reasonable to spend in a year, and set monthly amounts aside for that. Otherwise your risk seeing all that money in the bank and thinking that you should take an $8000 trip or four $2500 trips per year. That adds up fast. Also consider using travel hacking/credit card rewards to help fund your trips. I would invest most of that $19000 and save up for those other expenses as the need arises, while continuing to invest as much as you can.

grosvenor6

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Re: How am I doing so far?
« Reply #7 on: July 13, 2016, 06:21:28 AM »
We only have three trips in mind that we want to do in the next 4 years, Australia to visit family, so we would be staying with them for the trip, Africa for a volunteering program where we pay a certain amount and all food and housing are paid for, and then Spain or Italy for a Honeymoon.  We plan on using credit card rewards to help with these. I will definitely look into investing my money, whatever will help me retire early from this job, as I am not too happy working at.

FrugalFan

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Re: How am I doing so far?
« Reply #8 on: July 13, 2016, 06:35:40 AM »
I didn't mean to imply that you shouldn't travel. We travel a lot because it is important to us, but I also know exactly how that affects our FI goals. So we set a reasonable amount aside per year and stick to that and do more local travel in between big trips. So we save up for the bigger trips one year at a time. It really depends on your goals and spending/saving money in accordance with those goals. If FI is your major goal, you are in a great position to get there super fast with your low expenses. But you are also young and should be enjoying life along the way.